Marrakech – Morocco’s seven largest banks are entering a period of strengthening fundamentals, positioning the sector to capture major growth opportunities tied to the 2030 FIFA World Cup and a wave of infrastructure spending, according to a new peer credit analysis published Thursday by Fitch Ratings.

Morocco World News (MWN) received a copy of the report, which covers Attijariwafa Bank (AWB), Groupe Banque Centrale Populaire (GBCP), Bank of Africa (BOA), Saham Bank, Credit Immobilier Et Hotelier (CIH), Banque Marocaine pour le Commerce et l’Industrie (BMCI), and Credit du Maroc (CDM).

The three largest – AWB, GBCP, and BOA – are designated domestic systemically important banks and together represent about 60% of sector assets.

The report notes that aggregated net income at the seven banks rose 26% in 2025, attributing this turnover to a 17%-18% revenue growth and a 5% decline in loan impairment charges. Operating profit rose 24%, though Fitch’s core profitability metric – operating profit to risk-weighted assets – held stable at 2.3%, reflecting accelerated RWA growth.

Return on average equity improved to 12.9%, up from 12.4% in 2024 and 10% in 2022. Net interest margins held steady at 3.3%-3.4% across the sector.

Fitch expects further profitability gains in 2026 and 2027, though at a slower pace. “We expect banks’ fundamentals to further strengthen in 2026-2027, with profitability and asset-quality metrics benefitting from sustained loan growth and the gradual impact of structural reforms,” the report stated.

The agency cited lower expected trading revenues as rising inflation puts pressure on domestic bond yields. Trading income represents roughly 20% of operating income across the sector.

Under Fitch’s base case of oil prices averaging $70 per barrel in 2026, inflation is expected to pick up to 4% from 1.2% in 2025, as energy-related items represent 25% of Morocco’s CPI basket.

Infrastructure spending and reforms are reshaping the credit landscape

A key growth driver is Morocco’s planned $100 billion in public infrastructure projects over 2025-2030, including clean energy, transport, and World Cup preparations. The IMF estimates World Cup-related spending alone will reach MAD 190 billion ($20.5 billion), equivalent to 12% of GDP. The report states that around 70% of that spending will be funded through domestic bank lending.

Unconsolidated loan growth accelerated to 8% in 2025. Corporate loans, up 11%, were the main engine, linked to demand for investment financing tied to large infrastructure projects. Retail credit recovered to 4% growth, with mortgages up 3% and consumer loans up 5%, supported by lower interest rates.

Fitch expects credit growth of 3%-7% in 2026, assuming no protracted conflict in Iran. Bank Al-Maghrib’s accommodative monetary stance continues to support demand. “The largest banks have the most growth potential as they will be able to finance larger transactions,” the report added.

On asset quality, the consolidated Stage 3 loans ratio fell 60 basis points to 9.5% at end-2025, though Fitch notes this remains high even by African standards.

AWB consistently reports the lowest ratios, reflecting its strong risk management and access to prime corporate clients. Saham Bank and BMCI report the highest, which Fitch attributes to more conservative recognition of impaired loans.

The sector’s non-performing loan stock still rose 4% to MAD 102 billion, equivalent to 7% of GDP, partly reflecting anticipatory reclassifications ahead of stricter local accounting rules under the revised Circular 19G.

The sector’s cost of risk declined 20 basis points to 90 basis points in 2025, still above pre-pandemic levels of 60 basis points. “We believe the sector’s cost of risk has further scope to decline towards pre-pandemic levels of 60bp-70bp given favourable operating conditions and banks’ strong provisioning buffers,” Fitch said.

A planned secondary market for non-performing loans, potentially launching in 2026 under the revised Circular 19G, could further improve asset quality. Fitch estimates a 20% reduction in NPLs would boost CET1 ratios by 20 basis points on average across the seven banks, freeing up capital and liquidity for growth. 

Core capitalization remains reasonable. The average CET1 ratio dipped 20 basis points to 10.6% at end-2025 but stayed comfortably above the 8% regulatory minimum. The average Tier 1 ratio stood at 12%, some 300 basis points above the minimum requirement. Outstanding AT1 debt exceeded MAD 37 billion, representing 16% of the seven banks’ regulatory capital.

The gradual rollout of the Supervisory Review and Evaluation Process (SREP), expected to be fully implemented by 2027, is already encouraging stronger capital discipline. All three domestic systemically important banks now report Tier 1 ratios around 200 basis points above the 9% minimum.

“Stronger profitability has helped offset the impact of higher RWAs on capital ratios,” the report noted, adding that “capital buffers have widened, better positioning the sector to capture growth opportunities.”

Deposit growth and stable funding underpin the outlook

Funding remains a sector strength. Customer deposits grew 8.6% in 2025, with corporate deposits up 10%, retail up 6%, and diaspora deposits up 5%. Low-cost current and savings accounts represent about 80% of total deposits, one of the highest ratios among emerging markets.

Retail deposits made up 72% of the total, with remittances from non-resident Moroccans accounting for about 16% of sector deposits. The average cost of deposits fell to 90 basis points from 100 basis points in 2024. The consolidated loans-to-deposits ratio improved to 93%.

Fitch also flagged upcoming covered bond legislation as credit-positive. Once BAM finalizes the regulatory framework, banks could tap this market to diversify funding, reduce maturity mismatches, and lower costs. Eligible retail mortgages totaled MAD 259 billion ($28 billion) at sector level.

On the ratings front, AWB holds the highest long-term issuer default rating at BB+/Stable. BOA, CIH, and Saham Bank are rated BB/Stable. BMCI’s national rating was downgraded to AA+(mar) and placed on Rating Watch Negative after BNP Paribas entered exclusive discussions to sell its 67% stake to Holmarcom Group.

Regarding external risks, Fitch said a prolonged Middle East conflict would affect Morocco primarily through higher energy prices and weaker eurozone demand, but does not expect severe bank stress.

“The banks have resilient funding structures, limited reliance on external wholesale markets, and strong domestic market access,” the report stated. Morocco’s foreign exchange reserves and access to the IMF’s Flexible Credit Line provide additional buffers.